Southeast Asia has gotten its groove back. The region has been reshaping itself into the economic force that—in the early 1990s, before the Asian financial crisis deflated economic progress and expectations—many had foreseen for it. For most of the past decade, while China and India were grabbing the headlines, Southeast Asia was enjoying an economic renaissance that has largely escaped attention.

Southeast Asia covers 5 million square miles that span the distance from mountainous tribal lands in Northern Thailand to the 18,000 islands of Indonesia below the equator. It is home to 600 million people and is rich in natural resources. Over the years, the region has served as a way station between China and India in the spice trade, a hot spot of European colonialism, and a bloody intersection in the anti-communism campaigns after World War II.

Until the Asian financial crisis of 1997–1998, Southeast Asia was experiencing heady growth and benefitting from an influx of foreign capital. Malaysia’s stock exchange had the second-highest capitalization in Asia, after Japan. The region’s population was enjoying increasing opportunities and prosperity. But the value the region had spent many years building came crashing down unexpectedly and spectacularly in the late 1990s. The crisis was fueled by a toxic cocktail of weak banks, foreign-currency borrowing, speculative foreign capital, overleveraged real-estate projects, and consumer panic. In 1998, Indonesia, Malaysia, and Thailand all suffered slumps in GDP exceeding 6 percent.

Fortunately, the crisis was relatively short-lived because governments acted decisively, and the region resiliently regained its footing and momentum. The nations consolidated and recapitalized the banking industry.

The real GDPs of the Philippines and Singapore had fully recovered by 1999. The economies of Malaysia, Thailand, and Indonesia were back to precrisis levels within five years. Exports of all these countries exceeded their previous peaks by 2000. The capital ratio of banks—a measure of their ability to withstand losses—is much higher today than before the Asian financial crisis. Among banks headquartered in emerging markets, those in Southeast Asia recorded some of the highest total shareholder returns from 2005 through 2010. These structural improvements helped Southeast Asia weather the recent global crisis better than most other countries.

Today, the region has a GDP of $3 trillion—larger than that of Brazil or Russia. Southeast Asia’s annual GDP growth exceeded 7 percent from 2005 through 2010, a rate that also surpasses those of Brazil and Russia and is creeping up to India’s. Per capita GDP is approaching $5,500. The region has a higher share of global exports than India, Brazil, or Russia, too. It produces 87 percent of the world’s palm oil and 80 percent of its natural rubber, as well as 44 percent of Asia’s natural gas. Buoyed by strong domestic demand, trade with China and other emerging markets, and low debt levels, the region continued to grow during the Great Recession. If Southeast Asia were a nation, it would qualify as a high-profile BRIC (Brazil, Russia, India, and China). Global companies overlook the region at their peril. (See Exhibit 1.)

In addition, Southeast Asia is fast becoming an economically integrated region, with Singapore as the hub of financial and logistics activity and an example to other nations of what they might also achieve. The Association of Southeast Asian Nations (ASEAN) Economic Community, whose stated goal is to create a “region with free movement of goods, services, investment, skilled labor, and freer flow of capital,” has slated many trade barriers within the region for elimination or substantial reductions by 2015. While some business executives are skeptical that these goals will be fully achieved, the progress by ASEAN and others has established momentum that the private sector can now harness.

In order to throw a spotlight on Southeast Asia, The Boston Consulting Group has identified 50 fast-growing companies, the Southeast Asia challengers, that are expanding either within the region or globally. Southeast Asia certainly has many more noteworthy companies, but by narrowing the focus to 50, we hope to highlight and dramatize the competitive dynamics and environment of this vibrant region.